Convincing luxury labels to sell online was the hard part for Net-a-Porter’s founder, whose groundbreaking business has gone on to change the way women shop.
When Drapers learnt that Net-a-Porter was drafting in a new chief executive from Dunhill, all hell broke loose, with Net-a-Porter’s PR company frantically calling our news desk to pass on messages from chairman and founder Natalie Massenet, who founded the business in 2000.
The luxury sector is used to being in control of its news in the market, so eventually Massenet agreed to give her first interview to Drapers.
Massenet, who in terms of influence is something akin to the Anna Wintour of online fashion, is perhaps not what you might expect from one so influential. Though her background is in fashion journalism – she is a former fashion editor of Tatler – there is nothing Ab Fab about her.
She has thus far turned Net-a-Porter into a £55 million global business, but throughout the interview she is self-deprecating, preferring to pass credit to Net-a-Porter’s staff, and Mark Sebba, who recently shifted from chief executive to the role of chief operating officer following the appointment of Sven Gaede as chief executive last month.
She says: “I’ve always had the creative and fashion role and I’ve always surrounded myself with good business and financial people. There has been a misconception that it was just me at my kitchen table.”
Despite her modesty, Massenet was one of the pioneers of online shopping. Eight years ago she began thinking about a concept to sell the kind of beautiful clothes typically featured in glossy magazine shoots to cash-rich, time-poor women around the world.
Massenet says: “There was a perception that the internet was all about a skate and cool-guy community. Yahoo was the dominant search engine and the preconception was that internet shopping was all about discounting and not about service. It was not a glossy playground for luxury brands.”
Massenet told friends in the luxury sector that they should set up online stores, but none were convinced that it would work for them, insisting their clientele demanded a high service factor that could only be delivered by a bricks-and-mortar experience. Massenet, however, became increasingly frustrated by a seeming lack of understanding by the luxury sector and decided to strike out alone with an editorial-meets-etail site.
“The original concept was to blend editorial content and commerce,” she says. “I’d gone freelance as a journalist and was working from home. I started to realise that we were putting amazing things in magazines and people would call up and want to buy them straight off the page. The idea was to create one shop for a global customer.”
“These were the days of the pashmina – everyone from Hong Kong to Los Angeles got the memo about that look and I felt that if they had been available online, someone would have sold thousands.”
But given that luxury brands were sniffy about the internet, Massenet’s challenge had only just begun and it was a lucky break handed to her by Jimmy Choo founder Tamara Mellon who agreed to supply the venture that turned Net-a-Porter from a pipe dream into a reality. Anya Hindmarch was next to sign up to supply, and suddenly people started to notice Massenet’s concept.
“Jimmy Choo and Anya Hindmarch were visionary. Tamara Mellon straight away said this was how she wanted to shop. She didn’t see anything – no sketches, no business plan. Jimmy Choo was exploding at the time and it was an amazing calling card for us. It was an amazing business gift.”
Massenet has since repaid the favour by running the Jimmy Choo transactional site – something she won’t do for other brands.
“I still had conversations with brands that lasted hours. They took a lot of convincing. I had to smile a lot and beg a lot and show amazing pictures. Little by little they started to say yes,” Massenet adds.
Once the site got off the ground, sales were doubling every year, and this helped to drag yet more designer labels on board. The site also started to drive sales in the brands’ own stores because of additional exposure, according to Massenet. She says: “It was an amazing catalyst for fashion consumption. We also became like an online marketing partner. We could identify where in the world the brands had pockets of business, like India or the Middle East, which helped brands to understand where they might open stores.”
Net-a-Porter now stocks 160 brands, from Burberry, Prada and Dolce & Gabbana through to Stella McCartney, Chlo鬠Herv頌駥r and Zac Posen.
Massenet and Sebba have built an impressive business over the past eight years, turning a profit after just four years – something many other etail businesses have failed to do. Annual sales now stand at about £55m – up from £1.5m in the first year.
However, as the growth of the net gathers pace, Net-a-Porter is facing a bigger challenge. More bricks-and-mortar retailers – from designer indies to department stores – have begun dipping their finely manicured toes in the etail pool.
Similarly, luxury brands are setting up direct-to-consumer websites, slavering at the thought of the possible margin gains from shipping direct to the end consumer. At last count, Mulberry’s online sales were up 26% on last year. Though a recent survey by business consultancy Walpole, which represents 100 British luxury firms, showed that only a third of luxury global brands have a transactional site and, of the two-thirds that don’t, at least half have no intention of setting one up.
Also worth noting is LVMH’s US website, eLuxury, which stocks brands from the LVMH stable such as Louis Vuitton and Marc Jacobs alongside bought-in brands like J Brand and Rock & Republic. It is a direct competitor to Net-a-Porter in the US – in terms of its one-dimensional design and lack of engaging consumer interaction, eLuxury compares less than favourably with Massenet’s all-singing, all-dancing Vogue-quality site.
“I would have concerns if these businesses weren’t thinking of going online,” Massenet says. “There is room on the high street for flagship brand stores and multi-brand operators, and online it’s just the same. The consumer goes to a brand store for an immersive, undiluted experience. A multi-brand business has different qualities. The extraordinary mix of brands drives higher traffic. People come for one brand and leave with another. Established brands like to be positioned next to other credible brands or next to new brands, for instance. Our concept is a very fertile place for brands.”
She adds: “I am actively encouraging brands to launch their own sites to help drive more customer awareness.”
Massenet believes the UK market, particularly department stores, has been much slower to take to the internet than the US because of the history of the mail-order sector, which is steeped in credit-driven mid- to low-end purchases and brands. She says: “The US department stores have fantastic businesses online, but the US has a tremendous history in mail order. Setting up an internet business is heavy on logistics for big established retailers, though, and that means big costs. It is a great service extension for their [UK department store] customers though.”
Massenet has already pushed the button on new growth initiatives, including opening Net-a-Porter up to new markets. Clearly, there is significant potential left for the Net-a-Porter site – customer numbers are swelling by 5,000 a month while the average transaction value has surpassed £600 in the past year.
A week before the interview, Net-a-Porter had scored a US$100,000 (£50,633) spend in a single transaction. Aside from Harrods, there can’t be many retailers, let alone etailers, that can claim to be that tempting.
Although the business already ships to more than 170 countries, Massenet is set to launch Net-a-Porter sites in France, Germany and India, where it already has a significant number of what it calls EIPs – very important customers who “have access to cash but choose not to leave their desk to go shopping,” explains Massenet. These are likely to be businesswomen in chief executive or finance director positions.
Massenet has also added new categories this season, including sunglasses and lingerie, both of which have performed strongly.
By far the most exciting and significant development, though, is the planned launch of an online designer Sale shop called TheOutnet. Massenet won’t be drawn on the details at this stage, but says: “We are looking at diversification and we are growing considerably in a few areas. We need to prioritise what our key opportunities are.”
Online discount shops have become more prevalent in recent months with the launch of BrandAlley, Koodos and French site Vente Privee. Even Asos is getting in on the act with the launch of Asos Red in September. Discount businesses in general are outperforming the rest of the retail sector, with shoppers focusing on bargains. As retail becomes more difficult, a surplus of branded stock has been generated, so there are some great deals for discounters to capitalise on.
Massenet does not rule out the possibility of opening a bricks-and-mortar store in the long term. “Nothing is impossible but we are a virtual business right now,” she says.
A recent flurry of media speculation that Massenet has brought in investment advisers, which could lead to a sale of part of the company, would seem to stack with the appointment of a new chief executive and talk of a robust business model overlaid with various growth initiatives. But Massenet won’t bite when Drapers questions her about the future ownership of the etailer. Currently, French luxury goods group Richemont has a 28% share, Venezuelan company Baywinds has 28%, and Massenet is thought to own 17%, with the rest in the hands of other investors.
Massenet won’t comment on whether a review is underway. “If I had a dollar for every time this came up…,” she says before trailing off, remembering that this is an issue she doesn’t want to or shouldn’t comment on.
But she will tell us her forecast for the future of etail. “The internet will come to completely dominate retail,” she says. “Look at the way 11-year-olds are living their day-to-day lives already. More things will take place virtually. They won’t be meeting in public. They won’t be going to stores. We haven’t even begun to see just how many transactions are going to take place online. I attend internet conferences all the time and they literally make the hairs on the back of my neck stand up.”
If this crystal-ball gazing turns out to be correct then Massenet will be pocketing a fortune if she does one day opt to sell Net-a-Porter. Whenever that might be.
Who is your fashion mentor?
I probably have a list of 10. It’s definitely Anna Wintour as an editor. It’s all executed so beautifully, and US Vogue is a commercial entity – it’s a beautiful blend of fashion and commerce even though that is often perceived as deeply unfashionable by the luxury sector. Also, Rose Marie Bravo [former chief executive of Burberry], who launched Burberry Prorsum. She imparted a lot of wisdom and advice to me. Her ability to run a huge business in such a hands-on way and manage it as if it was a three-person company was hugely inspiring. As a peer, I am dumbfounded by Anya Hindmarch, who not only is a mother, businesswoman and designer, but who also goes to the gym.
What is your favourite store?
I do almost all of my shopping online but I can’t replace Portobello Market. I love interiors shopping, and shops like ABC Carpet & Home in New York, and Restoration Hardware. I also love Colette in Paris for the way it edits the offer, and 10 Corso Como in Milan because it is very beautiful. I also love the Apple stores, Ocado and Amazon.
If you weren’t in fashion, what would you be doing?
Making films. I started my career as an assistant director on low-budget films in Los Angeles. With the introduction of video to the Net-a-Porter site, I’m kind of going back to that in a funny way.
2004 Net-a-Porter becomes profitable
2000 Sets up Net-a-Porter
1997 Fashion editor, Tatler
1993 Moves to W magazine
1990 Starts working on magazines, first for Italian Moda and then Womenswear Daily (WWD)
1988 Assistant film director